woensdag 18 april 2012

Silver Lease Rates Jump To One Year High (and then fall back to where they were previously)

Recently, the long term silver (PSLV) (SLV) lease rates jumped to a one year high since May 2011 (Chart 1).

On 17 April 2012, the one year lease rate was 1.05%, the 6 month lease rate was 0.73%, the 3 month lease rate was 0.47% and the 1 month lease rate was -0.26%.

It is notable that the 1 month lease rate didn't increase as much as the longer term lease rates. Another interesting point is that the long term lease rates almost doubled in a very short period, indicating scarcity in silver metal liquidity. According to the London Bullion Market Association’s over-the-counter guide published on its website: “Heavy forward selling activity or a decrease in the supply of liquidity will push down forward swap rates and lead to upward pressure on lease rates.” What happened today is very bullish for the silver price.

Chart 1: Silver Lease Rates

I already wrote about gold lease rates in this previous article, pointing out that high lease rates are an omen of easing price manipulation by bullion banks like J.P. Morgan and HSBC. When silver lease rates go up, it means that we can expect an increase in the silver price in the next few months.

It has to be said that silver lease rates are still below their all time high of 2% in 2008, but it's especially the sharpness of the increase that's notable.

The expiry date for the CME May silver options is 25 April 2011. Mostly, the price movements near options expiry dates are in declining mode just before the options expiry. This way call options are made worthless. After the expiry date, we could have a huge boost in silver price fueled by this increase in lease rates.

Edit:

Apparently it was a mistake from Kitco's chart. The real silver lease rates are given here: